Fitch Affirms SCG 2013-CWP Hotel Issuer Inc.

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the following classes of SCG 2013-CWP Hotel Issuer Inc., commercial pass-through certificates, series 2013-CWP (all currency amounts are Canadian dollars unless noted otherwise):

--$135.9 million class A-2 at 'AAAsf'; Outlook Stable;

--$25 million class B at 'AAsf'; Outlook Stable;

--$40 million class C at 'Asf'; Outlook Stable;

--$65 million class D at 'BBBsf'; Outlook Stable;

--$40 million class E at 'BBB-sf'; Outlook Stable.

The interest-only class X is not rated by Fitch. Class A-1 is paid in full.

KEY RATING DRIVERS

Although leverage has decreased since one of the original five hotel properties was released in 2015, affirmations are warranted at this time as cash flow has experienced some volatility. Excluding the sold hotel, overall portfolio net cash flow (NCF) remains above issuance levels. However, the servicer-reported trailing 12-month (TTM) NCF as of April 2016 declined 4.5% to $51.1 million from $53.6 million a year earlier. Additionally, some of the hotels have had or will have new competition in their respective markets. Fitch's stressed debt service coverage ratio (DSCR) and loan to value (LTV) for the trust component of the debt are 1.64x and 63.6%, respectively. There is a $64.6 million interest-only mezzanine loan subordinate to and co-terminus with the trust mortgage. The transaction has a standard sequential-pay structure.

The portfolio consists of four, Westin-flagged hotels that are well-located in the downtown core of four of Canada's six largest cities. The Westin Bayshore (Vancouver) was sold in 2015 with proceeds allocated to the senior classes. Both the Calgary and Edmonton Westin hotels had a decline in revenue per available room (RevPAR) and occupancy year-over-year (as of end of April 2016). The Ottawa Westin property performance has been stable. Operations at the Westin Harbour Castle (Toronto) were affected in late 2015 by a flood at the North Tower with rooms being taken off. It is expected that the rooms will be updated to current brand standards as part of the remediation.

Between 2005 and 2012, the properties underwent approximately $181 million ($61,887 per key) in capital expenditures. Therefore, there were no property improvement plans (PIPs) required upon the loan sponsor, Starwood Capital Group's, purchase of the portfolio. Also, prior to issuance, the sponsor signed a 30-year management agreement with Starwood Hotels.

The ratings reflect strong historical Canadian commercial real estate loan performance, including a low delinquency rate and low historical losses. In addition, the legal framework generally favors lenders' rights.

RATING SENSITIVITIES

The Rating Outlook for all classes remains Stable. As the transaction continues to amortize with strong cash flow and no further economic headwinds from the decline in oil prices, upgrades may be possible. Conversely, no downward rating actions are expected unless there is significant deterioration of property occupancy and cash flow.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Related Research

SCG 2013-CWP Hotel Issuer Inc. -- Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732564

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010268

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010268

Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160811005949/en/

Primary Analyst:
Jeffrey Diliberto, +1-312-368-3268
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

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